I plan to do this article and another one to feature a couple of aspects of the discussions contained in the report. This first one deals with some various systemic risks that were talked about. Right now, there is very little talk anywhere about triggers for another major crisis that could lead to the kind of changes we watch for here. However, this report does contain some very thoughtful exchanges of ideas on that. Below are a few excerpts that illustrate that.

----------------------------------------------------------------------------------------------------------------Heinz Blasnik:
'What we are seeing is similar to what we usually see in the final stages of a bubble. And
we are currently hearing a lot of bubble talk in the media. But at the same time we also see that
people who previously made bearish comments have capitulated, and have turned bullish.
Retail inflows into equity mutual funds reached a new high in early 2017, margin debt is at a
record high, speculators have large net long futures positions and the Shiller PE ratio is the
second highest on record. So sentiment and valuation indicators are very stretched, If you look
at the last 2-3 years the indicators have been stretched for a long time so, which is also typical
for the late stages of asset bubbles, but makes precise timing tricky as well.

But this time the differentiating factor is that the money supply is declining at the same
time as the indicators become ever more stretched. This situation is similar to what
happened prior to previous market peaks; the market continues to do well, but the monetary
backdrop is weakening. And while we can’t tell with precision when it will happen, the current
situation suggests a high probabiility that we will have another crash. I don’t think it will be like
2008 when it took a while from the time the market started turning down until it actually crashed.
I believe that this time we will experience a very sharp correction that will happen more quickly
and come as a surprise. A dangerous development in this context is the large increase in
quantitative/ systematic investing strategies and the proliferation of ETFs. Many ETFs are
holding investments that are not particularly liquid - particularly corporate bond ETFs - which is
likely to pose a big problem in the next downturn."

Luke Gromen:
"It’s interesting to hear Heinz’s thoughts because we have written about something similar to this,
just from a slightly different angle, multiple times this year. The consensus has been that the
dollar would continue strengthening, that inflation would finally take off and that growth would
resume, but coming into 2017 we were saying that the US economy was in much worse shape
than the consensus believed. And in the first half of the year we have seen the disinflationary impulse grow and the dollar weakening. We continue to be bearish on the fundamental side of
the economy, but what we wrestle with is how that translates into both the political situation and
US risk assets. Pension fund problems have started to come to the forefront with Illinois
potentially being downgraded to junk, Connecticut has had funding problems, New
Jersey and Maine have also begun seeing fiscal strains.

If we were to have a sell-off in risk assets, the funding situation for these states would get
much worse. Furthermore, from a broader perspective, we have done research on what
percentage of consumption is driven by capital gains (and therefore in large part by stock
prices), and the number is high. In the US 60%-65% of GDP is driven by consumer spending,
and a lot of that spending is driven by capital gains in the stock market. The US therefore finds
itself in a precarious situation where economic fundamentals appear to be worsening, which is
happening in conjunction with a worsening fiscal crisis (of which Illinois, Conneticut, New Jersey
and Maine are important symptoms.) If we get any type of US recession or crash in the stock
market there will be fiscal and political problems in the US very rapidly. And so we believe the
Fed will very rapidly introduce monetary measures if we do have a crash because they
understand how precarious the situation currently is, both from a fiscal and political side."

------------------------------------------------------------------------------------------------------------My added comments: This gives you a feel for the discussions in this report. The report covers a broad range of issues and the quality of the information is very good. In our next article, we will look at some excerpts of the discussion in this report about whether there is political pressure in the US to get a weaker dollar.BullionCoin Update: While we wait for additional news on BullionCoin, it appears that another competitor in this space plans to enter the market in Q4 2017. GlintPay appears to be based in London and has this website up . Some comments on it are found in this article on TechCrunch. Here is a quote from the TechCrunch article:"However, I understand that Glint will offer a frictionless way to both store and spend your money in gold, including at the point of sale, just like a regular local currency." 8-11-17: Two new Twitter comments from Andrew Maguire here and here. They say BullionCoin will launch on 8-15-17 along with the white paper. Timed to coincide with the 46th anniversary of Nixon taking the US off the gold standard.

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